Tuesday saw the start of the groundbreaking antitrust lawsuit against Google in Washington, D.C.'s District Court. The government's accusation is that Google employed an exclusive feedback loop with "tying" contract arrangements to secure its lead in search. Ahead of the proceedings, both Google's CEO and Apple's senior VP of services featured as potential witnesses.
At the biggest tech antitrust trial in decades, the Department of Justice and a coalition of state attorneys general led by Colorado argued on Tuesday that Google has utilized billions of dollars to ensure its search engine remains the default on internet browsers and phones, thus creating a cycle of monopoly profits that impedes rivals from gaining market share. To support their respective positions, both the government and Google will call on economic experts, company executives, and individuals from other businesses to provide evidence. Google CEO Sundar Pichai is expected to be one of the witnesses. For the government, the first witness to be questioned was followed by Sridhar Ramaswamy, a former senior advertising executive for Google who co-founded a competitor search engine, Neeva. Despite the company's closure in May, Neeva had previously agreed to its acquisition by Snowflake. The four-week trial continues with the DOJ's "case-in-chief," followed by the coalition of state attorneys general and then Google.
The DOJ's lawyer took Google chief economist Hal Varian through a set of documents, starting with a memo of his penned in 2003, entitled "Thoughts on Google v Microsoft". Varian said that the memo was written whilst he was working under someone who reported straight to the CEO. The memo warned Google directors of possible antitrust issues and suggested that they should "be cautious with what is expressed in public and private" on that topic. In the memo, Varian wrote: "We should also consider entry barriers, switching costs and intellectual property when deciding which products to prioritise." During his testimony, Varian mentioned that the most effective entry barrier is an outstanding product.
Kenneth Dintzer, the DOJ's lawyer, presented his opening statements in court that this case regards the future of the internet and whether Google's search engine will ever face opposition. He pointed out that Google holds over 89% of general search market share - general search being something that consumers employ as an "on ramp to the internet" unlike other search services. Dintzer stated that there are no alternatives to general search. The DOJ accuses Google of maintaining its hegemony through a cycle that results in strengthening the company's market position, making it even tougher for competitors to join. William Cavanaugh of Patterson Belknap Webb & Tyler, representing the states, declared that since the FTC passed on an antitrust case against Google around 10 years ago, Google has increased its efforts to include defaults in its agreements.
Google acknowledges the significance of defaults, the DOJ claims, spending over $10 billion annually to maintain its default status in browsers and on devices. The idea of not being the default on Apple's products was called a "code red situation" by the company. Google allegedly tried to prevent Apple from constructing a competitive product, and when Apple introduced a feature that Google was "concerned" about, Google modified the revenue-sharing deal to limit Apple's growth. Device manufacturers take the agreements as they have no other option, and when Samsung and AT&T looked into collaborating with Branch Metrics, a search engine offering that could answer questions by searching phone apps, Google reportedly put an end to it. Furthermore, the government says Google utilized a supposedly impartial ad-buying tool to hinder competition from Microsoft. Lastly, the DOJ reported that Google established a program named "Communicate With Care" which instructed personnel to keep files related to revenue-share agreements, in addition to an email from CEO Pichai of 2021 that asked to set the history setting on a group to "off" before deleting the request.
Google claimed that the success of their search engine was due to their innovation, not efforts to hinder rivals. Speaking on behalf of Google, John Schmidtlein of Williams & Connolly stated that competition has never been more real due to the fact that search queries can now be entered across multiple applications and websites. Schmidtlein noted that this case was not analogous to the DOJ's allegations against Microsoft back in the 1990s as Google was competing for default status then. Microsoft had not invested or innovated their search engine for a prolonged period, Schmidtlein argued, and Google had no obligation to work with Microsoft on their terms. Although Google had met four out of Microsoft's five requests for their search ad device, the remaining feature of real-time bidding had taken years for Google to construct for their own product and a compatible version with Microsoft's tools is currently being tested. Google also highlighted that advertisers are motivated by the return on their investments and are willing to switch to other platforms if they believe they can gain a better advantage.
Schmidtlein further explained that browser and device makers find default features useful to attract consumers and generate revenue. Mozilla, however, discovered this the hard way when they switched their default from Google to Yahoo in 2014 before terminating the deal early in 2017. Apple, on the other hand, expressed that the reason for Google being their default search engine is for the best user experience. Lastly, Google argued that their revenue-sharing deals amplify the competition between Apple and Android, prompting them to invest in better devices.
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